Buffett - A Voice of Reason in the Midst of Market Madness

This was an interesting week in the markets, dominated by the fact that it was the worst week for the US Stock market in four years. There was also some evidence that credit woes in the subprime market are starting to spread to other markets, some comments from Alan Greenspan, and a GDP revision that gave people some things to talk about.

I’m not a big believer in acting on the day to day, week to week, or even month to month fluctuations of the market, so even though I find this stuff interesting and I follow the news, it did not have any effect on how I’m currently allocating my investment dollars.

In the midst of all this market action this week, one newsworthy item in particular rose head and shoulders above the rest. I was able to find some time on a slow Friday afternoon at work to read a publication that comes out every year around this time- Warren Buffett’s annual letter to Berkshire Hathaway shareholders. This letter can be found on Berkshire’s website along with archived letters from previous years. If you want to go straight to the PDF document for 2006, just click here (direct link to the pdf document).

I read the letter twice, and I found a few interesting themes, which I’ve decided to cover over the next few posts.

There is a reason why I link to Buffett’s letters on the side panel of this site. It is because I think they are one of the best investment guides you could ever read. In fact, I’ve noted before that many people think a thorough study of Buffett’s letters over the years is akin to an MBA in investments. It is a free resource, it is a valuable resource, and I think anyone who is saving or investing money, or is even the least bit interested in the markets should read these letters every year when they come out.

This week in particular, Buffett's letter was just what the doctor ordered.